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School district consolidation: Market concentration and the scale‐efficiency tradeoff

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  • Timothy J. Gronberg
  • Dennis W. Jansen
  • Mustafa U. Karakaplan
  • Lori L. Taylor

Abstract

Consolidation is often proposed as a strategy for increasing school district quality without increasing educational funding. However, if consolidation reduces competition in the local school market and reduces efficiency, any savings from exploiting economies of scale may be lost to increased inefficiency. We use a stochastic cost function to investigate these effects for districts in Texas. We find important economies of scale, but we also find that increased market concentration leads to increased cost inefficiency. Finally, we illustrate the practical importance of these two potentially offsetting factors in a simulation that considers consolidating Texas school districts to county‐level districts. We find that failure to consider the effect on competition can lead to large overestimates of the benefits of consolidation.

Suggested Citation

  • Timothy J. Gronberg & Dennis W. Jansen & Mustafa U. Karakaplan & Lori L. Taylor, 2015. "School district consolidation: Market concentration and the scale‐efficiency tradeoff," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 580-597, October.
    • Handle: RePEc:wly:soecon:v:82:y:2015:i:2:p:580-597
    DOI: 10.1002/soej.12029
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    References listed on IDEAS

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    3. Mustafa U. Karakaplan & Levent Kutlu, 2017. "Handling Endogeneity in Stochastic Frontier Analysis," Economics Bulletin, AccessEcon, vol. 37(2), pages 889-901.
    4. TANAKA Ryuichi & Eric WEESE, 2023. "Inefficiency in School Consolidation Decisions," Discussion papers 23002, Research Institute of Economy, Trade and Industry (RIETI).
    5. Zhao, Yu & Du, Hui & Li, Rui & Zhou, Guangsu, 2024. "The long-term influence of education resources allocation on the migration: Evidence from the China’s rural school consolidation policy," Journal of Asian Economics, Elsevier, vol. 91(C).

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